Friday | 17 April | 2020
By Anja van den Berg
If you think your money problems stem from a lack of money, think again. Good financial stewardship is about exercising good habits and avoiding the following bad habits.
- Over-using credit cards and mounting up debt
Debt traps you in the past, says Beckbessinger, author of How to manage your money like a f***ing grownup. The book focuses on the mental blocks holding people back from financial success. Debt is one of these mental blocks. The 2014/15 World Bank Report states that South Africans are the globe’s biggest borrowers. More than half of South Africans are three months or more behind in their debt repayments. If you are in debt, don’t just turn a blind eye and hope for the best. It will not end well.
- Having savings and debts at the same time
Money is fungible, Beckbessinger explains, “which, in plain English, means a rand is a rand”. But, because humans have feelings, we attach meanings to different ‘types’ of money. We like to keep money in savings accounts because it makes us feel good, and we don’t use our savings to pay our debts because that makes us feel bad, Beckbessinger says. However, if you measure the actual price of this approach, it might cost you more in the long run. For instance, if you have invested in a fixed deposit account at a 6.6% interest rate, but your credit card debt is charged at 20%, you are losing money.
- Putting off managing your money
There will always be a reason to put off managing your money. Yet, the earlier you start, the more money in your pocket. For instance, someone who saves R1 000 a month starting at age 25 can end up R1 million more fruitful than someone who starts at 30. Thanks to compound interest, starting to save for your retirement in your 20s can make a lifetime’s difference. You also need to understand inflation. Inflation is the enemy of savings, Beckbessinger cautions. “If your investment is not growing at a rate that beats inflation, over time, that money is worth less and less.”
It will be close to impossible to avoid these pitfalls if you don’t have a budget. Failure to compile a budget keeps people down, says Lettie Mzwinila, a specialist in strategic markets at Allan Gray. A budget is a plan for your money, and without one, you can’t manage your spending.
According to research by TymeBank, only 37% of us draw up a budget and stick to it. The majority of those who do so are women between 25 and 45, who earn less than R10,000 a month. Shockingly, 36% of us use a “loose mental budget”, and 19% of us draw up a budget — but don’t stick to it.
The Street: https://www.thestreet.com/personal-finance/biggest-money-mistakes-to-avoid
* All information was correct at the time of publication.